Blue Devil LLP uses CVP analysis to consider and manage the costs of providing consuling services. Consulting revenues for the most recent period were $1,000,000 for 10,000 billing hours. Management has determined that contribution margin was 35% of consulting revenues. Fixed costs were $224,00. Blue Devil currently charges a single hourly billing rate for all associate hours. Moreover, revenue is recognized on a complete contract basis (i.e., no revenue is recognized until the service is complete).

a. How many minimum hours should be billed to avoid loss?

b. Whats the safety of margin in hours, if Blue Devil charged 10,000 hours during the period?

c. The management team is concerned that certain costs previously classified as variable are actually fixed. If $50,000 of variable costs from the last period were reclassified as fixed costs, by how much would the break-even number of billing hours increase or decrease?